Sydney house prices tipped to go south - but when will the bubble burst?

Friday 23 June 2017

Article by Roisin Kelly-Goldsmith

Homeowners on the Sydney property ladder may soon see their properties become less valuable, after economists have tipped that median house prices will wind down over the next two years.

sydney-house-prices-tipped-to go-south-but-when-will-the-bubble burst

Apartment and house prices in the harbourside city are expected to drop by around 4%, according to a BIS Oxford Economics paper dubbed “Residential Property Prospects 2017 to 2020”.

If the prediction rings true, this means that Sydney’s median house price will drop by $60k to $1.15 million, while the value of apartments will sit at around $744,000 as opposed to the current median price at $785,000, realestate.com.au figures show.

Economic forecasters at BIS believe that part of the reason this will happen is due APRA’s crackdown on investor lending.

“A tighter lending environment will affect Sydney more than anywhere else because that’s where the bulk of investors were buying and where they put in the highest price offers,” explained Senior Manager of Residential Property Market Research at BIS, Angie Zigomanis.

While Zigomanis is expecting to see Sydney property prices slump, he said that there won’t be a “US-style crash”.

KPMG International added to the property bubble talk earlier this week with the release of its latest report, tipping that median house prices in Sydney and Melbourne are being overvalued by 14% and 8% respectively.

Chief Economist of the firm, Brendan Rynne, said that whether or not current housing prices in both capital cities mean that there’s a housing bubble, is “a matter for debate”.

However Mozo Product Data Manager, Peter Marshall has been saying for months now that an Australian property bubble burst is on the cards, with the Sydney market most likely to pop first.

“We know that auction clearance rates are losing momentum in Sydney and last month 23 Aussie financial institutions were slapped with lower credit ratings. It’s only a matter of time before something bigger comes along that will trigger the end of the bubble,” he said.

Marshall urged Sydneysiders with larger mortgages to protect themselves from potential rate rises in the future (or an economic downturn) by making additional mortgage repayments or refinancing to a lower rate.

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